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Argo profit down, dividend up

14 August 2017 By Malavika Santhebennur

Australian equities small cap, 8EC posted its maiden dividend for the half-year ended 31 December.
Australian listed investment company (LIC), Argo Investments Limited, has announced a full-year profit of $211.5 million for the year ended 30 June 2017, down 2.2 per cent from the corresponding 2016 period, and an increased final dividend of 16 cents per share fully franked.

Argo’s managing director, Jason Beddow, said the company’s annual dividend had risen for the fifth year in a row, with the 31 cents per share achieved this year a record high.

“The full-year result and increased dividend was a good outcome, especially considering the reduced dividends we received from a number of the larger companies in the investment portfolio during the first half of the year,” Beddow said.

“In the second half, we saw improved business and consumer confidence as concerns of fallout from further political upheaval did not eventuate. Global share markets have continued to march upwards, particularly in the US, driven by the rapidly growing technology sector which is pushing stock market indices to record highs.”

He added five cents of Argo’s dividend came from taxable capital gains in the portfolio, which allowed the firm to pass on the benefit of the long-term capital gains tax discount as a tax deduction to shareholders.

The Argo share price return, including the benefit of franking credits on the dividends paid to shareholders was +10.3 per cent.

For the past year to 30 June 2017, Argo’s net tangible asset backing performance returned +12.9 per cent after deducting all costs and tax, compared to the Australian Securities Exchange (ASX) 200 Accumulation Index which returned +14.1 per cent without allowing for any costs or tax.

The firm said its underweight position in the materials sector, particularly the smaller and mid-size resource companies, hindered its performance relative to the broader market.

“Although this portfolio positioning is not unusual due to Argo’s preference for companies that can generate growing dividend income, it does occasionally result in underperformance when mining stocks are in favour,” the firm said.

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